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Monday, February 2, 1998 Published at 23:56 GMT


US wipes out the deficit

[ image: BBC Correspondent:<br>Andrew Walker]
BBC Correspondent:
Andrew Walker
President Clinton has announced that the budget of the United States government is about to be in surplus for the first time in 30 years. Next year, the Federal government will spend over $9 bn less than it raises in taxes. For years the deficit in the government's finances was a contentious issue in US politics, particularly under Mr Clinton's predecessor in the White House, George Bush. The BBC's Business Correspondent Andrew Walker looks at how the American public finances have been transformed and what the benefits might be:

In 1992, the year that Bill Clinton was elected to the presidency, the budget deficit hit its peak of 4% of US economic output or GDP. Since then, the deficit has declined steadily and is now close to being eliminated.

That remarkable progress, however, owes less to the management of the public finances than to sustained strong economic growth. The 1990s have been an unusually long period of expansion, which has brought unemployment down far lower than most economists thought possible at the start of the decade.

The result is soaring tax revenues and less government social spending on the unemployed. In addition, the end of the cold war has helped to contain defence spending.

Already the arguments are under way about what to do with the surpluses. The President wants to increase some spending programmes.

The Republican opposition wants tax cuts. Alan Greenspan, head of the Federal Reserve the US central bank, told Congress last week that the money should be used to repay government debt, and reduce future interest payments.

There will also be an argument about a proposal in the budget for extra money for the International Monetary Fund. The administration thinks economic crises like East Asia's can affect America and wants the IMF to be able to fund financial rescues.

Many members of Congress are opposed to US money going into such operations.

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